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Commercial Marketplace 1999


Commercial Marketplace 1999
February 18, 1999

Downtown Seattle: Hold on to your hat

CB Richard Ellis

In the depths of winter, it's easy to forget what an incredible place downtown Seattle has become. Exuberance is not the first emotion one feels as the rain pours down relentlessly, as the Clinton impeachment drones on, and as both of our biggest employers simmer in hot water - Boeing with its huge layoffs and ominous talk of takeover threats; Microsoft with its antitrust battles.

But sure as the sun will burst forth in July (it had better), Seattle's downtown is poised to embark on another round of breathtaking growth and innovation. The region's largest city has changed dramatically over the past few years, in ways that many citizens are just now starting to realize. But in our opinion, we haven't seen anything yet.

Union Station
Union Station's redevelopment is just one of several major projects which will transform the International District.
Over the next few years, we think Seattle's downtown will change more than it did at the height of the high rise boom in the 1980s. We'll even go out on a limb and predict that it will change as much as it has at any time since the Great Fire of 1889. The result will have profound implications for everyone: downtown residents and merchants; employers and employees; and landlords and tenants. As specialists in the sale and leasing of office properties, we've also identified some particular challenges in that area.

So what looms ahead? The very definition of "downtown" will expand dramatically.

To the north, the industrial zone between the retail core and south Lake Union will become home to a cluster of biotech and technology companies.

Microsoft co-founder Paul Allen has extensive land holdings in the area, and already is working to build a new molecular institute for famed University of Washington scientist Leroy Hood. Other such operations are sure to follow, lured by proximity to the Fred Hutch cancer research center and ZymoGenetics.

To the south, the International District will hum with new restaurants and office users, thanks to new Mariners and Seahawks stadiums and the swirl of new office development at Union and King Street stations. Amidst it all, pedestrians will eventually stream to and from a new intermodal transit station.

Pioneer Square and First Avenue will upgrade its appearance, thanks to the new leadership at Samis Land Co. A renovation of historic Smith Tower, the crown jewel in the Samis empire, is already well under way.

The city will finally connect its waterfront to the rest of downtown. Seattle has made great progress already, what with Bell Street Pier, a new Maritime Museum, the first two phases of the Harbor Steps apartment complex, and the Intracorp condominiums along Alaskan Way. Now the job will be completed. Harbor Steps will finish its last two phases; the Intracorp condos will finish and fill up, and various tenants, led by Visio software firm, will occupy a trio of sparkling new office buildings created by the Port and Wright Runstad. Next we'll see an expanded aquarium, a new Marriott Hotel, and, most miraculously, the arrival of the first Alaska-bound cruise ships in the summer of 2000.

  • Traffic, civic improvements coming

    Seattle finally will fund long-needed transportation and civic improvements. Traffic snarls along First Avenue South will abate, thanks to the FAST Corridor plan for new road ramps over heavily used freight and passenger train tracks.

    A gleaming new library will get built and the city will knock down several ugly and seismically unsafe municipal buildings and replace them with a more attractive government center.

  • More residential is on the way

    The high-rise core will join the Denny Regrade as a residential center. Harbor Steps is not the only residential project pioneering in the downtown office district. On the edge of the retail core, Bentall Corp. and Luis

    Guincher have broken ground on a tall apartment tower - perhaps the first of several in the area. And Martin Smith Inc. plans to build a cluster of high-

    end condominiums atop its Millennium Tower office project. Finally, Samis may do small residential infill projects in several locations.

    Paired with these broad changes in the city's character will be several trends specific to the office market. Look for:

  • Tenant base is changing

    Instead of the traditional office users, such as law, finance, insurance and real estate companies, expect to see the continued dominance of software and Internet companies such as Visio, Real Networks and Amazon.com. Many traditional users will consolidate and downsize, or disappear altogether (as seen with Bogle & Gates). The obvious exception to this trend will be fast-growing thrift Washington Mutual.

    High-tech firms often grow so rapidly that they can't wait two years for a new property; their space-planning horizon is measured in months, not years.

    That means landlords will have to be much more nimble in filling space needs.

    High-tech firms tend to employ young, culturally minded people. So smart landlords will make sure their building caters to these workers' lifestyle by installing more bike racks, showers, a cybercafe in the lobby, and whatever else it takes.

  • Landlords need to be open-minded

    Today's tiny start-up firm can prove to be tomorrow's Microsoft. Landlords won't want to miss out on that opportunity to host the "next big thing," so many will consider leasing space to high-tech unknowns with very short track records.

    Downtown landlords who want to attract the high-tech user will need to build more flexible buildings, equipped with everything from fiber optics to raised floors, souped-up ventilation and mechanical systems, and fun, contemporary design.

    Adaptive reuse of older buildings will be hot - just look at the renovation of the International Trade Center for RealNetworks, the overhaul of the Pacific Medical Center for Amazon, and conversion of an old Seattle Times warehouse into space for NextLink Communications.

  • Will office towers make a comeback?

    All of our recent office development has occurred in the suburbs or in low-rise buildings on the fringes of downtown. But the downtown office tower will come back, especially when our transit system is built out and big companies find that downtown is a convenient place to concentrate their workforce.

    Simply put, major employers need large floor plates of 25,000 square feet or more, and the amenities and transit options that a densely populated urban center offers. Plus, the region simply lacks enough zoned land to allow countless large employers to build sprawling Microsoft-style campuses.

    The picture we paint above gives an inkling of just how dynamic and exciting the next few years will be in Seattle. All the rain jokes aside, Seattle's incredibly vital downtown is the envy of most cities nationwide. Next time your umbrella blows inside out, try to remember that.

    Jane Blair is a vice president in the office group and Stephen Storrar is first vice president in the investment group with the Seattle office of CB Richard Ellis.


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